Running head: MAJOR DEBATES OVER MACROECONOMIC POLICY
Major Debates Over Macroeconomic Policy
MAJOR DEBATES OVER MACROECONOMIC POLICY
Active monetary and fiscal policy and the increased government spending in fighting
recessions are major unresolved issues in macroeconomics which are central to the current
political debates. There is a division between the policymakers on whether increasing the
government spending through an expansionary policy can fight recession by promoting
economic growth or whether it would hinder the growth of the economy (Cloyne & Hürtgen,
2016). There is also a debate on whether to implement a monetary policy or a fiscal policy in
stimulating the growth of the economy whereby the two opposing sides have valid reasons for
their arguments. This paper discusses the arguments on whether to implement a monetary or
fiscal policy in stimulating the economy and whether increasing the government expenditure
would fight recessions or not.
Active monetary and fiscal policy
Active monetary and fiscal policies are powerful policies that the Federal Reserve and the
government can use in steering the economy in the right direction (Langdana, 2009). When they
are applied correctly, they may have a similar impact of increasing the growth of the economy
and slowing down the rate of recession. However, the major political debate revolves around the
policy which is more effective in stimulating the growth of the economy.
Active Fiscal policy
A fiscal policy is whereby the government uses its taxing and spending power to impact
the economy in the required direction. An indirect or direct fiscal policy can have an influence
on capital expenditure, personal expenditure, deficit levels, ex...